G.R. No.

203949

SPOUSES GEORGE A. GALLENT, SR. and MERCEDES M. GALLENT, Petitioners,

vs.
JUAN G. VELASQUEZ, Respondent.

x-----------------------x

G.R. No. 205071

JUAN G. VELASQUEZ, Petitioner,

vs.
SPOUSES GEORGE A. GALLENT, SR. and MERCEDES M. GALLENT, Respondents.

DECISION

REYES, J.:

Before this Court are two conflicting decisions rendered by two different divisions of the Court of
Appeals (CA) on the same question of whether the Regional Trial Court (RTC) may validly issue
an ex parte writ of possession to the transferee of the winning bidder at the extrajudicial foreclosure
sale of mortgaged real property.

Antecedent Facts

George A. Gallent, Sr. (George) was the registered owner of a 761-square-meter residential property
covered by Transfer Certificate of Title (TCT) No. S-99286, 1 located at No. 3, Angeles Street,
Alabang Hills Village, Muntinlupa City, with improvements thereon consisting of a two-storey house
and a swimming pool. On December 20, 1996, the Spouses George and Mercedes Gallent
(Spouses Gallent) mortgaged the said property to Allied Banking Corporation (Allied Bank) as
security for a loan of Pl.5 Million. The Spouses Gallent failed to pay their loan, which had ballooned
to P4,631,97 4.66; thus, Allied Bank extrajudicially foreclosed the mortgaged property. At the public
auction, Allied Bank emerged as the highest bidder and was issued a corresponding certificate of
sale2 dated September 25, 2000. Since the Spouses Gallent failed to redeem the subject property
after one year, Allied Bank consolidated its ownership over the subject property. Accordingly, TCT
No. S-99286 was cancelled and replaced with TCT No. 84603 in the name of Allied Bank.4

On June 11, 2003, Allied Bank agreed to sell back the foreclosed property to the Spouses Gallent for
P4 Million, as evidenced by an Agreement to Sell, 5 wherein the Spouses Gallent paid a down
payment of P3.5 Million, evidenced by an Official Receipt (O.R.) No. 0990687-A6 dated March 12,
2003, and the balance thereof was payable in 12 monthly amortizations. It was also stipulated that
the Spouses Gallent would be allowed to keep the possession of the subject property as tenants or
lessees of Allied Bank. 7

Due to financial difficulties, sometime in October 2003, the Spouses Gallent sought the help of their
close family friend, Juan Velasquez (Velasquez), to help them settle their remaining monthly
amortizations. As an inducement, they agreed that Velasquez would have the subject property
registered under his name until they have repaid him. 8

On October 24, 2003, the Spouses Gallent executed a Deed of Assignment of Rights9 whereby they
assigned to Velasquez all their rights, interests, and obligations under their Agreement to Sell with
Allied Bank. Velasquez paid Allied Bank the remaining balance amounting to P216,635.97,
evidenced by O.R. No. 0006352. 10

On November 5, 2003, Allied Bank and Velasquez executed a Deed of Absolute Sale 11 over the
subject property for the price of P4 Million, wherein George himself signed as an instrumental
witness. 12 However, the said instrument was not registered. Subsequently, Velasquez caused
another Deed of Sale13 dated November 19, 2003, over the subject property which showed a lower
selling price of Pl.2 Million to be registered, purportedly for tax purposes.

On November 28, 2003, TCT No. 1181414 was issued under the name of Velasquez to replace TCT
No. 8460.

After more than four years, or on June 27, 2008, Velasquez sent a demand letter15 to the Spouses
Gallent to vacate the subject property, but the latter refused to do so. On July 6, 2009, Velasquez
filed an ex parte petition for issuance of a writ of possession, docketed as LRC Case No. 09-055, in
the RTC of Muntinlupa City. 16 The Spouses Gallent sought to dismiss the petition by filing
Consolidated Motions for Leave to Intervene and to Dismiss Petition17on January 14, 2010.

On February 12, 2010, the RTC of Muntinlupa City, Branch 256, issued an Order18 denying the
Spouses Gallent's consolidated motions, viz:

The issuance of the writ of possession is a ministerial duty of the court upon filing of the
proper application and proof of title and by its nature does not require notice upon persons
interested in the subject properties. By virtue of the sale of the properties involved, [Velasquez]
became the new owner of the lots entitled to all rights and interests its predecessor [Allied Bank] had
therein, including the right to file an application for writ of possession. The court therefore finds the
petition to be sufficient in form and substance.

As to the motion for leave to intervene filed by [Spouses Gallent], the same will be treated by this
court as their opposition to the petition and they will be considered an oppositor.

Wherefore premises considered, the motions are hereby denied for lack of merit.

xxxx

SO ORDERED.19 (Emphasis ours)

The Spouses Gallent filed a motion for reconsideration but it was denied by the RTC in an
Order20 dated April 13, 2010, reasoning as follows:

The instant motion deserves a scant consideration considering that the issues and arguments raised
by the oppositors are mere rehashed which were already passed upon by this court in the order
sought to be reconsidered. To reiterate, it is a ministerial duty on the part of this court to act on
cases of this nature, particularly if the twelve-month period for redemption had already lapsed.
Should the oppositors intend to recover title over the subject property, the same should be ventilated
in a separate proceeding and proceed independently of this petition.

Wherefore premises considered, the motion for reconsideration is hereby denied for lack of merit.
Accordingly, the reception of ex parte evidence is hereby assigned to the Branch Clerk of Court to
act as Commissioner and to make a report to this Court ten (10) days upon completion thereof.
xxxx

SO ORDERED.21

On July 2, 2010, the Spouses Gallent filed a petition for certiorari22 before the CA, docketed as CA-
G.R. SP No. 114527, raffled to the Special 4th Division, seeking to annul the RTC Orders dated
February 12, 2010 and April 13, 2010. Invoking Mendoza v. Salinas,23 the Spouses Gallent argued
that: (1) the RTC has no jurisdiction to issue an ex parte writ of possession to Velasquez since he
did not acquire the property at a foreclosure sale, but purchased the same from the mortgagee,
winning bidder and purchaser, Allied Bank, and only after it had consolidated its title thereto;24 (2) in
their Agreement to Sell, Allied Bank and the Spouses Gallent entered into new contractual relations
as vendees-lessees and vendor-lessor, and ceased to be mortgagors and mortgagee;25 (3)
Velasquez should have filed an action for ejectment or for recovery of ownership or possession, not
an ex parte petition for writ of possession;26 and (4) the RTC's duty to issue the writ has ceased to be
ministerial in view of the Spouses Gallent's adverse claim upon the property based on their
substantial payment of its purchase price, in addition to the fact that Velasquez and Allied Bank
executed a forged deed of sale.27

Meanwhile, on July 7, 2010, the RTC rendered its Decision28 in LRC Case No. 09-055, the
dispositive portfon of which reads:

WHEREFORE, in view of the foregoing and considering that it is a ministerial duty of the court to
issue writ of possession, the redemption period having been expired without the subject property
being redeemed by the mortgagors, the petition is hereby granted. Accordingly, let a writ of
possession be issued in favor of [Velasquez] and against the oppositors and all persons claiming
rights under them, to place [Velasquez] in possession of the subject property and for the oppositors
and all persons claiming rights under them to vacate the land covered by TCT No. 11814 of the
Register of Deeds of Muntinlupa City.

SO ORDERED.29

On September 24, 2010, the Spouses Gallent filed another petition for certiorari30 before the CA,
docketed as CA-G.R. SP No. 116097 and raffled to the 10th Division, arguing that the deed of sale
between Velasquez and Allied Bank was a forgery. In their certification of non-forum shopping,31 they
mentioned the pendency of CA-GR. SP No. 114527 in the CA. Surprisingly, neither of the parties
nor the CA 10th Division moved for the consolidation of CA-G.R. SP No. 116097 with CA-G.R. SP
No. 114527.

Meanwhile, on October 21, 2010, the Spouses Gallent also filed before the RTC of Muntinlupa City a
complaint for "Reformation of Instruments, Consignation, Annulment of TCT No. 11814 of the
Registry of Deeds for the City of Muntinlupa and Damages With Application for Immediate Issuance
of Temporary Restraining Order and/or Writ of Preliminary Injunction," docketed as Civil Case No.
10-102. In this action, the Spouses Gallent sought to annul the deed of assignment they executed in
favor of Velasquez allegedly because their true intent was an equitable mortgage. They thus prayed
to declare void the sale between Velasquez and Allied Bank on account of forgery, to order the
judicial consignment of the amount of P216,635.97 to settle their "loan" from Velasquez, and to
enjoin him from taking possession of the property. 32

Rulings of the CA

CA-G.R. SP No. 116097

The CA 10th Division rendered its Decision33 on May 23, 2012 finding that since Allied Bank, the
mortgagee-purchaser at the extrajudicial foreclosure sale, is entitled to an ex parte writ of
possession after the title to the mortgaged property had been consolidated in its name, Velasquez,
as the bank's transferee of the said property may also petition the court for an ex parte writ of
possession since he merely stepped into the shoes of Allied Bank. The 10th Division also ruled that
the Spouses Gallent can no longer be considered to hold an interest in the property adverse to Allied
Bank or Velasquez after they assigned their entire interest therein to Velasquez. Having no more
claims on the title of either Allied Bank or Velasquez, an ex parte writ of possession may issue
against them.

On October 12, 2012, the CA 10th Division denied the Spouses Gallent's motion for
reconsideration.34 On December 6, 2012, they filed a Petition for Review on Certiorari35 before this
Court docketed as G.R. No. 203949.

CA-G.R. SP No. 11.4527

The CA Special 4th Division issued its Decision36 dated August 28, 2012, finding that an ex parte writ
of possession cannot issue against the Spouses Gallent since they are adverse claimants of the
property who are in actual possession. The CA relied on Mendoza, 37 where the Court ruled that
an ex parte writ of possession may be issued as a ministerial duty of the court only in three
instances: (a) in a land registration case, as provided under Section 17 of Act No. 496; (b) in a
judicial foreclosure of real estate mortgage; or (c) in an extra judicial foreclosure of real estate
mortgage under Section 7 of Act No. 3135,38 as amended. 39 According to the CA, since Velasquez
did not acquire his title to the property in a foreclosure sale, but bought the same directly from Allied
Bank after title had been consolidated in the said bank, he must first bring an ejectment suit or
an accion reivindictoria against the Spouses Gallent in order for him to obtain possession thereof. 40

According to Mendoza, an ex parte writ of possession ceases to issue as a ministerial duty of the
court when sought against a party who has remained in the property upon an adverse claim of
ownership, viz:

Based on these tenets, the issuance of a writ of possession, therefore, is clearly a ministerial duty of
the land registration court. Such ministerial duty, however, ceases to be so with particular
regard to petitioners who are actual possessors of the property under a claim of
ownership. Actual possession under claim of ownership raises a disputable presumption of
ownership. This conclusion is supported by Article 433 of the Civil Code, which provides:

Actual possession under claim of ownership raises a disputable presumption of ownership. The true
owner must resort to judicial process for the recovery of the property. Under said provision, one who
claims to be the owner of a property possessed by another must bring the appropriate judicial action
for its physical recovery. The term "judicial process" could mean no less than an ejectment suit or
reinvindicatory action, in which the ownership claims of the contending parties may be properly
heard and adjudicated. 41 (Citation omitted and emphasis ours)

Velasquez filed a motion for reconsideration, but it was denied;42 hence, he filed a Petition for Review
on Certiorarz43 before this Court docketed as GR. No. 205071.

Ruling of the Court

The Court grants the petition of the Spouses Gallent, but denies the petition of Velasquez.
The general rule in extrajudicial
foreclosure of mortgage is that after
the consolidation of the title over
the foreclosed property in the
buyer, it is the ministerial duty of
the court to issue a writ of
possession upon an ex parte
petition44 by the new owner as a
matter of right.

It is well-settled that the purchaser in an extrajudicial foreclosure of real property becomes

the absolute owner of the property if no redemption is made within one year from the registration of
the certificate of sale by those entitled to redeem. 45 As absolute owner, he is entitled to all the rights
of ownership over a property recognized in Article 428 of the New Civil Code, not least of which is
possession, or jus possidendi:46

A torrens title recognizes the owner whose name appears in the certificate as entitled to all the rights
of ownership under the civil law. The Civil Code of the Philippines defines ownership in Articles 427,
428 and 429. This concept is based on Roman Law which the Spaniards introduced to the
Philippines through the Civil Code of 1889. Ownership, under Roman Law, may be exercised over
things or rights. It primarily includes the right of the owner to enjoy and dispose of the thing owned.
And the right to enjoy and dispose of the thing includes the right to receive from the thing what it
produces, [jus utendi; jus fruendi] the right to consume the thing by its use, [jus abutendi] the right to
alienate, encumber, transform or even destroy the thing owned, [jus disponendi] and the right to
exclude from the possession of the thing owned by any other person to whom the owner has not
transmitted such thing [jus vindicandi].47

Possession being an essential right of the owner with which he is able to exercise the other
attendant rights of ownership, 48 after consolidation of title the purchaser in a foreclosure sale may
demand possession as a matter of right.49 This is why Section 7 of Act No. 3135, as amended by Act
No. 4118, imposes upon the RTC a ministerial duty to issue a writ of possession to the new owner
upon a mere ex parte motion.50 Section 7 reads:

Sec. 7. In any sale made under the provisions of this Act, the purchaser may petition the Court of
First Instance of the province or place where the property or any part thereof is situated, to give him
possession thereof during the redemption period, furnishing bond in an amount equivalent to the use
of the property for a period of twelve months, to indemnify the debtor in case it be shown that the
sale was made without violating the mortgage or without complying with the requirements of this Act.
Such petition shall be made under oath and filed in form of an ex parte motion in the registration or
cadastral proceedings if the property is registered, or in special proceedings in the case of property
registered under the Mortgage Law or under Section 194 of the Administrative Code, or of any other
real property encumbered with a mortgage duly registered in the office of any register of deeds in
accordance with any existing law, and in each case the clerk of court shall, upon the filing of such
petition, collect the fees specified in paragraph 11 of Section 114 of Act No. 496, as amended by Act
No. 2866, and the court shall, upon approval of the bond, order that a writ of possession issue,
addressed to the sheriff of the province in which the property is situated, who shall execute said
order immediately.

In Spouses Arquiza v. CA,51 it is reiterated that simply on the basis of the purchaser's ownership of
the foreclosed property there is no need for an ordinary action to gain possession thereof:
Indeed, it is well-settled that an ordinary action to acquire possession in favor of the purchaser at an
extrajudicial foreclosure of real property is not necessary. There is no law in this jurisdiction whereby
the purchaser at a sheriff's sale of real property is obliged to bring a separate and independent suit
for possession after the one-year period for redemption has expired and after he has obtained the
sheriff's final certificate of sale. The basis of this right to possession is the purchaser's ownership of
the property. The mere filing of an ex parte motion for the issuance of the writ of possession would
suffice, and no bond is required. 52 (Citations omitted)

As also explained in Asia United Bank v. Goodland Company, Jnc.,53 the ex parte application for writ
of possession is a non-litigious summary proceeding without need to post a bond, except when
possession is being sought even during the redemption period:

It is a time-honored legal precept that after the consolidation of titles in the buyer's name, for failure
of the mortgagor to redeem, entitlement to a writ of possession becomes a matter of right. As the
confirmed owner, the purchaser's right to possession becomes absolute. There is even no need for
him to post a bond, and it is the ministerial duty of the courts to issue the same upon proper
application and proof of title. To accentuate the writ's ministerial character, the Court has
consistently disallowed injunction to prohibit its issuance despite a pending action for annulment of
mortgage or the foreclosure itself.

The nature of an ex parte petition for issuance of the possessory writ under Act No. 3135 has been
described as a non-litigious proceeding and summary in nature. As an ex parte proceeding, it is
brought for the benefit of one party only, and without notice to or consent by any person adversely
interested. 54 (Citations omitted)

Moreover, not even a pending action to annul the mortgage or the foreclosure sale will by itself stay
the issuance of the writ of possession, as held in BPI Family Savings Bank, Inc. v. Golden Power
Diesel Sales Center, Inc., et al.:55

Furthermore, it is settled that a pending action for annulment of mortgage or foreclosure sale does
not stay the issuance of the writ of possession. The trial court, where the application for a writ of
possession is filed, does not need to look into the validity of the mortgage or the manner of its
foreclosure. The purchaser is entitled to a writ of possession without prejudice to the outcome of the
pending annulment case. 56 (Citations omitted)

When the thing purchased at a

foreclosure sale is in turn sold or
transferred, the right to the
possession thereof, along with all
other rights of ownership, follows
the thing sold to its new owner.

In Laureano v. Bormaheco, 57 the mortgagee-purchaser, Philippine National Cooperative Bank

(PNCB), sold the foreclosed lots located in Bel-Air, Makati City to Bormaheco, Inc. without first
seeking its possession. The latter filed an ex parte petition for a writ of possession, but the RTC of
Makati City ordered the service of a copy of the petition upon the former owners, the Spouses
Laureano, who as in the case before the Court, opposed the ex parte petition and moved to dismiss
the same on the ground of the RTC's lack of jurisdiction. The RTC denied the said motion, which
was upheld by the CA in a certiorari action. When the case reached the Court, it was held that, by
the nature of an ex parte petition for writ of possession, no notice is needed to be served upon the
Spouses Laureano, the mortgagors-debtors of PNCB, since they already lost all their interests in the
properties when they failed to redeem them. By virtue of the sale, Bormaheco, Inc. became the new
owner of the lots, entitled to all rights and interests that its predecessor PNCB acquired, including
the right to a writ of possession.

As an exception, the ministerial

duty of the court to issue an ex
parte writ of possession ceases
once it appears that a third party,
not the debtor-mortgagor, is in
possession of the property under a
claim of title adverse to that of the
applicant.

Section 33 of Rule 39 of the Rules of Court provides that in an execution sale, the possession of the
property shall be given to the purchaser or last redemptioner, unless a third party is actually
holding the property adversely to the judgment obligor.

Sec. 33. Deed and possession to be given at expiration of redemption period; by whom executed or
given. - If no redemption be made within one (1) year from the date of the registration of the
certificate of sale, the purchaser is entitled to a conveyance and possession of the property; or, if so
redeemed whenever sixty (60) days have elapsed and no other redemption has been made, and
notice thereof given, and the time for redemption has expired, the last redemptioner is entitled to the
conveyance and possession; but in all cases the judgment obligor shall have the entire period of one
(1) year from the date of the registration of the sale to redeem the property. The deed shall be
executed by the officer making the sale or by his successor in office, and in the latter case shall have
the same validity as though the officer making the sale had continued in office and executed it.

Upon the expiration of the right of redemption, the purchaser or redemptioner shall be substituted to
and acquire all the rights, title, interest and claim of the judgment obligor to the property as of the
time of the levy. The possession of the property shall be given to the purchaser or last redemptioner
by the same officer unless a third party is actually holding the property adversely to the
judgment obligor. (Emphasis ours)

Pursuant to Section 6 of Act No. 3135, the application of Section 33, Rule 39 of the Rules of Court
has been extended to extrajudicial foreclosure sales, thus:

Sec. 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore
referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of said
debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust
under which the property is sold, may redeem the same at any time within the term of one year from
and after the date of the sale; and such redemption shall be governed by the provisions of Sections
464 to 466, inclusive, of the Code of Civil Procedure, in so far as these are not inconsistent with the
provisions of this Act.
1âw phi 1

In China Banking Corporation v. Spouses Lozada, 58 it was held that for the court's ministerial duty to
issue a writ of possession to cease, it is not enough that the property be held by a third party, but
rather the said possessor must have a claim thereto adverse to the debtor/mortgagor:

Where a parcel levied upon on execution is occupied by a party other than a judgment debtor, the
procedure is for the court to order a hearing to determine the nature of said adverse possession.
Similarly, in an extrajudicial foreclosure of real property, when the foreclosed property is in the
possession of a third party holding the same adversely to the defaulting debtor/mortgagor, the
issuance by the RTC of a writ of possession in favor of the purchaser of the said real property
ceases to be ministerial and may no longer be done ex parte. For the exception to apply, however,
the property need not only be possessed by a third party, but also held by the third party adversely
to the debtor/mortgagor. 59 (Citation omitted)

Specifically, the Court held that to be considered in adverse possession, the third party possessor
must have done so in his own right and not merely as a successor or transferee of the debtor or
mortgagor:

The exception provided under Section 33 of Rule 39 of the Revised Rules of Court contemplates a
situation in which a third party holds the property by adverse title or right, such as that of a co-owner,
tenant or usufructuary. The co-owner, agricultural tenant, and usufructuary possess the property in
their own right, and they are not merely the successor or transferee of the right of possession of
another co-owner or the owner of the property. x x x.60(Citations omitted)

Thus, in BPI Family, 61 the Court held that it was an error to issue an ex parte writ of possession to
the purchaser in an extrajudicial foreclosure, or to refuse to abate one already granted, where a third
party has raised in an opposition to the writ or in a motion to quash the same, his actual possession
thereof upon a claim of ownership or a right adverse to that of the debtor or mortgagor. The
procedure, according to Unchuan v. CA,62 is for the trial court to order a hearing to determine the
nature of the adverse possession, conformably with the time-honored principle of due process.63

In Okabe v. Saturnina, 64 the Court made a definite ruling on the matter, to wit:

The remedy of a writ of possession, a remedy that is available to the mortgagee-purchaser to

acquire possession of the foreclosed property from the mortgagor, is made available to a
subsequent purchaser, but only after hearing and after determining that the subject property is still in
the possession of the mortgagor. Unlike if the purchaser is the mortgagee or a third party during the
redemption period, a writ of possession may issue ex parte or without hearing. In other words, if the
purchaser is a third party who acquired the property after the redemption period, a hearing must be
conducted to determine whether possession over the subject property is still with the mortgagor or is
already in the possession of a third party holding the same adversely to the defaulting debtor or
mortgagor. If the property is in the possession of the mortgagor, a writ of possession could thus be
issued. Otherwise, the remedy of a writ of possession is no longer available to such purchaser, but
he can wrest possession over the property through an ordinary action of ejectment.65

In regard to their deed of

assignment in favor of Velasquez,
the Spouses Gallent may be
considered as adverse possessors in
their own right, the said agreement
being in essence an equitable
mortgage.

It is the Spouses Gallent's contention that the Deed of Assignment of Rights which they executed in
favor of Velasquez was in reality an equitable mortgage under Article 1602 of the New Civil Code.
The Spouses Gallent maintained that their true agreement with Velasquez was an equitable
mortgage and not an assignment of their interest in the subject property.66 Having substantially paid
the repurchase price of their property, that is, P3,790,500.00 out of the price of P4 Million, they
insisted that they had virtually recovered full ownership of the house when they entered into an
equitable mortgage with Velasquez. To prove their allegation, they filed an action, Civil Case No. 10-
102, to reform the said deed into a mortgage. In addition, they are seeking to declare void the
transfer of the title to Velasquez.
An equitable mortgage67 has been defined as one which although lacking in some formality, or form
or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties
to charge real property as security for a debt, there being no impossibility nor anything contrary to
law in this intent. 68 A contract where the vendor/mortgagor remains in physical possession as lessee
or otherwise has been held to be an equitable mortgage. 69 In determining the nature of a contract,
the Court is not bound by the title or name given to it by the parties, but by their intention, as shown
not necessarily by the terminology used in the contract but by their conduct, words, actions and
deeds prior to, during and immediately after executing the agreement. 70

Without in any way pre-empting the trial court's factual determination in Civil Case No. 10-102,
particularly as regards what the Spouses Gallent may have additionally received from Velasquez by
way of favor or consideration for the house, if any, the Court will rule on the matter, but only in order
to resolve the question of whether the Spouses Gallent may be considered as adverse claimant-
occupants against whom an ex parte writ of possession will not issue. The substantial payment for
the repurchase from Allied Bank of the subject property, P3,790,500.00 out of the price of P4 Million,
as against Velasquez's assumption of the remaining balance of P216,635.97, entitles the Spouses
Gallent to the legal presumption that their assignment to Velasquez of all their interest under their
Contract to Sell with Allied Bank was an equitable mortgage. In a contract of mortgage, the
mortgagor retains possession of the property given as security for the payment of the sum borrowed
from the mortgagee. 71 By the clear dictate of equity, and as held in Rockville Excel International
Exim Corporation v. Spouses Culla and Miranda,72 when the vendor remains in possession of the
property sold as lessee or otherwise, or the price of the sale is unusually inadequate, as in this case,
the law deems the contract as an equitable mortgage. 73

It is evident that on account of the Spouses Gallent's substantial down payment under their contract
to sell, Allied Bank allowed them to remain in the property, albeit as "lessees". The Spouses Gallent
eventually paid a total of P3,790,500.00, all within five months. After the additional payment by
Velasquez of P216,635.97, the next logical step would have been for Allied Bank to execute the sale
in favor of the Spouses Gallent, by virtue of their Contract to Sell, but the Spouses Gallent had
assured Velasquez that he could keep the title to the property until they have repaid him. To achieve
this, they executed a deed of assignment to enable Allied Bank to transfer the title directly to
Velasquez, since a transfer, first to the Spouses Gallent, and then a sale or assignment to
Velasquez, would have entailed paying capital gains and documentary stamp taxes twice, along with
the transfer fees. It was also apparently agreed with Velasquez that the Spouses Gallent could
remain in the property, but it seems that they could do so not just as lessees but as owners-
mortgagors.

If there was a forgery in the sale to Velasquez by Allied Bank, it was obviously a mere ploy to reduce
the taxes and fees due on the said transaction, and not the cause of the transfer of the title of Allied
Bank to Velasquez. The consent of the Spouses Gallent to the said transfer, for the probable
reasons already expounded, is clear from the fact that George himself signed in the first deed of sale
to Velasquez as an instrumental witness. But even if it is eventually shown that there was in fact
forgery for the purpose of committing fraud against the Spouses Gallent, as held in Capital Credit
Dimension, Inc. v. Chua, 74 they, as third party occupants, should not be adversely affected by the ex
parte writ of possession sought by Velasquez, for not being parties to the forgery. Thus, they cannot
be summarily ejected without due process.

To recapitulate, it is important to note that this controversy can no longer be considered as an

offshoot of the extrajudicial foreclosure proceedings involving Allied Bank, but rather is the result of a
subsequent personal transaction between the Spouses Gallent and Velasquez, which they called an
assignment; but which the law otherwise recognizes as an equitable mortgage. In the face then of
the ex parte motion of Velasquez for a writ of possession, it must be kept in mind that, under the
facts laid down, the contending parties are now Velasquez and the Spouses Gallent. The Spouses
Gallent's defense of equitable mortgage is upheld in law and, they have a superior right to retain the
possession of the subject property in their own right.

WHEREFORE, premises considered, the petition in G.R. No. 203949 is GRANTED. The Decision
dated May 23, 2012 of the Court of Appeals in CA-G.R. SP No. 116097 is SET ASIDE.

The petition in G.R. No. 205071 is DENIED. The Decision dated August 28, 2012 of the Court of
Appeals in CA-G.R. SP No. 114527 is AFFIRMED.

No costs.

SO ORDERED.